Judging private judges

Published 4:00 am, Thursday, January 3, 2002

TO LAND a job, buy a home or enroll in a health plan, millions of Americans agree to take future grievances before a private judge-and-jury known as an arbitrator.

The process is billed as quicker, cheaper and more efficient than the delay- prone public courts. A fair hearing before an impartial arbitrator can have all these qualities, and decades of use and court rulings have firmly planted the process in everyday commercial life.

But major employers, financial institutions and health-care plans are corrupting this system to cut costs and employees' rights. As a Chronicle series detailed, arbitration can be filled with nasty surprises for workers or consumers.

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The system doesn't always provide the fairness it promises. A few examples: Taking a case to arbitration can often cost more in fees than filing suit in court. Limited awards discourage lawyers from defending individuals against large companies. There are few enforceable rules. Decisions, even when legally wrong, can't be appealed.

The system badly needs reform, but political reality won't admit the need for change. Since 1996, seven attempts to answer problems with mandatory arbitration were defeated or vetoed in Sacramento. Pro-business legislators in both parties outnumber reformers, and Gov. Gray Davis is decidedly cool to significant changes.

This sorry record may end. Beginning with a hearing on Feb. 12, the Legislature could trim away the glaring abuses without undoing the basic advantages of arbitration.

Assemblyman Darrell Steinberg, D-Sacramento, who chairs the Assembly Judiciary Committee, will hold a hearing on the ethics and conduct of arbitrators. It's a focused approach calculated to avoid the huge political juggernaut that has flattened broader reform efforts.

Steinberg's target is the "the arbitration industry itself," he says, meaning the conduct of arbitration firms and recruitment of arbitrators.

As The Chronicle series showed, a state judge may rule on cases to win favor with private arbitration firms which may later hire the jurist.

In other instances, major arbitration firms hold investments in companies with cases before them, posing a conflict of interest. Several studies indicate arbitrators favor corporations and regular clients over individuals.

With arbitration an everyday reality for so many Californians, it makes sense to make sure the system delivers fair results. If arbitrators themselves are falling short, then so is the entire process.